Comments on: Exploring Enterprise Software Pricing Models

By: Jay Kiley

Jay Kiley — Tue, 20 Feb 2007 05:02:16 +0000

Could i call you about advice on how to price our enterprise software?

By: Vinod Oommen Ninan

Vinod Oommen Ninan — Sat, 17 Feb 2007 17:59:58 +0000

As all of you agree, subscription model is the way to go for SaaS model especially with respect to entreprise solutions.

Subscription model as such is very diverse. As debated over here, can be appreciate its value(by upgrading the software, without any down-time) or depreciate(Not upgradation happening).Even while depreciating, as SaaS employer can gain revenue by means of the quantity of users without shelling out a single penny(Provided the deployment model in SaaS is highly scalable). The argument hold true as all research publications estimate a major market share for SaaS in couple of year down the line.

However, there are lot of other ways which we can make use of this subscription. It can be either through subscription based on transactions, based on the number of DDL statements, or even based on the number of users.

By: Dave Stephens

Dave Stephens — Mon, 18 Dec 2006 23:03:41 +0000

Ya, I could have written that piece better, because the point was more positive towards SaaS and the subscription model than you’ve deduced.

The issue is if you pay $1MM upfront for some enterprise software, independent of support & without the right to automatically get upgrades, there’s no doubt the value of that software declines over time.

Going with a subscription model, on-premise or on-demand, changes that. It treats the software as an expense (just like rent). Which makes a lot of sense compared to the prior case. Whether the intrinsic value of the software goes up or down over time is vendor-specific and up to debate.

Good to hear from you David! Congratulations on your recent release – I’ll try to post on it before the end of time :)

By: David Bush

David Bush — Mon, 18 Dec 2006 13:49:41 +0000

Hi Dave,

Nice breakdown. However, I either don’t fully understand or don’t agree with the assessment of SaaS as a depreciating asset. My opinion would be the opposite, as I feel that you run a larger risk of having dormant software with a perpetual license (that only has the carrot of upgrades) than with a shorter term SaaS license. Our software has had major upgrades every year since 2002 and the functionality is easily 5x-10x greater now than it was for some of our first wave of clients. Even though their cost has not changed, the software does much more (ie, appreciating).

SaaS vendors are required to do this for survival and you can see the success of it with the extremely high percentage of contract extensions throughout the eSourcing industry.

I guess your results all depends what neighborhood you live in. ;)